‘The rot has set in’: Parliament warns of National Lotteries Commission collapse

The Portfolio Committee on Trade, Industry and Competition has warned of the collapse of the National Lotteries Commission (NLC) due to corruption.

On Thursday, the Special Investigation Unit (SIU), South African Police Service (Saps), Hawks and National Prosecuting Authority (NPA) briefed the committee on the investigations and prosecutions in relation to the alleged corruption and misadministration at the NLC.

In November 2020, President Cyril Ramaphosa signed a proclamation authorising the SIU to investigate the NLC and recover any losses.

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The SIU said the 40 nonprofit organisations (NPOs) and nonprofit companies (NPCs) it investigated allegedly received help from government officials, accounting firms and auditors to qualify for National Lotteries Commission (NLC) grants.

The grants, earmarked to improve the lives of poor South Africans, were not used for their intended purposes.

‘The rot has set in’

Committee Chairperson Mzwandile Masina said the collusion between NPOs and officials needed to stop the NLC is to be saved.

“The rot has set in and is perpetuated by the conduct of officials and a network of other collaborators, including auditing firms and non-profit organisations,” chairperson of the committee, Mzwandile Masina, said.

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“If left unchecked, malfeasance has the potential to collapse this social benefit institution, meant to enhance the work of government through availing funding to the needy, in support of developmental projects. The NLC is such a prestige funding institution we cannot afford to lose.

“There is a need for improved detection systems that can pick up corrupt behaviour at [the] application phase, and if there are deficiencies or missing information on any application that is submitted.”

NLC launches anti-grant initiatives

In a media briefing last month, NLC Commissioner Jodi Scholtz said the commission was working to improve governance and compliance.

“We have been able to ensure that our internal audit unit is fully capacitated with the right skills. We have also implemented an internal governance framework which governs how we work and also signed code of conducts,” said Scholtz.

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“These are very important mechanisms for us to hold each other accountable. We have implemented lifestyle audits, these are ongoing. They started last year. The members of Exco [Executive Committee] have already been subjected to those.”

Scholtz added that the NLC had launched a comprehensive programme to combat bribery, corruption, and fraud within its grant funding department.

“That’s our biggest area of risk. We have looked at digital transformation as a way to streamline our operations, enhance our transparency and also improve our service delivery,” said Scholtz.

“This modernisation drive will ensure that we remain competitive and comparative, not only to other grant funders within South Africa but also internationally.”

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Scholtz said the NLC would visit projects where funding was misappropriated to ensure reparations are made. According to the SIU, about 30 such projects have been identified.

Prosecutions

The law enforcement agencies on Thursday told the committee that cases against those involved in the looting of the NLC had been opened. However, synergy was needed in the areas of referrals, proclamations and investigations.

The value of contracts under investigation with potential civil litigation is about R2 billion. However, the SIU has recovered only R9.5 million of this.

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Seven directors and 13 companies have been referred to the Companies and Intellectual Property Commission (CIPC) to be placed under the delinquency list and to be barred from registering companies with CIPC in future.

Masina called on the law enforcement agencies to hold people accountable.

“Prevent a situation where we create this entity as a crime scene. There is no right for those who are there to substitute wrong with wrong and think we will not hold them accountable. If nothing is done, we will be back here to investigate in the next five years. There are issues at the NLC and they need to be resolved.”